Chinese stocks and energy companies are expected to lead advances by Asian equities this year, according to a survey of participants attending a Credit Suisse Group AG (CSGN) investor conference in Hong Kong last week.
The worst performances may come from India and Japan, said a statement on the poll results posted on Credit Suisse’s website on March 25. The MSCI Asia excluding Japan Index will rise between 10 percent and 20 percent in 2011, according to 46 percent of the survey’s respondents. The gauge, which tracks more than 600 companies, has fallen 1.5 percent this year, after a 17 percent climb in 2010.
“People are broadly bullish,” Jahanzeb Naseer, Credit Suisse’s Hong Kong-based product manager for Asian research, said in a phone interview on March 25. “The risks are on oil going up, the Middle East, and the Europe debt crisis.”
A 15 percent surge in crude this year amid mounting political turmoil in the Middle East and North Africa has stoked inflation concerns in countries from China to India, which have both raised interest rates in 2011. Speculation mounted last week that Portugal would join Ireland and Greece in seeking bailout packages after lawmakers rejected budget cuts proposed by Portuguese Prime Minister Jose Socrates.
Credit Suisse’s 14th annual Asian Investment Conference attracted more than 2,000 investors and delegates from over 270 companies, the bank’s statement said. Results from the bank’s poll indicate some investors think concerns related to Chinese measures to curb inflation may be overdone, Naseer said.
Exceeding Target
The Shanghai Composite Index has climbed 6 percent this quarter, the best performance among Asia’s biggest equity markets. The gauge is still 5.8 percent below a seven-month high reached Nov. 8. Annual inflation reached 4.9 percent in February, slowing from a two-year high of 5.1 percent in November. Policy makers have boosted borrowing costs three times since the start of 2010 while raising banks’ reserve requirements nine times, including an increase on March 18.
“The general vibe is that actually inflation is not going to be that much of a worry, that in the second half of the year, inflation concerns are going to wane,” Naseer said. “A lot of people are thinking that because of tightening policies growth is going to be considerably lower. It’s going to be a little lower, but it’s still going to grow in about the 9 percent range. That’s a pretty good scenario for China.”
Poll respondents favored energy companies amid optimism higher crude prices will bolster earnings, Naseer said. Gauges of material and energy shares in the MSCI Asia excluding Japan Index rose more than 4 percent in 2011, the most of 10 industry groups. Crude futures in New York touched $106.95 a barrel on March 7, the highest intraday price since September 2008. Oil prices have gained 31 percent in the past year.
‘Growth Hiccup’
For oil, “$100-$120 a barrel is what markets can absorb without having a huge growth hiccup,” Naseer said. “Our view is that oil shouldn’t go up much beyond where it is now. There are expectations of easy spare capacity in Saudi Arabia” that can help relieve any supply constraints, he said.
The MSCI gauge climbed 4.4 percent last week, the most since November, as Japan made progress stabilizing reactors at a nuclear plant crippled after the nation’s worst earthquake. The gauge trades for 12.8 times estimated profit, down from a multiple of 14.6 times on Dec. 31. The Nikkei 225 (NKY) Stock Average rose 3.6 percent last week, after a 14 percent slump the previous two weeks.
“Many of the investors are looking to get into the markets sensing that valuations are overly discounted,” he said. “However if the yen continues to strengthen, that’s not good for the Japanese market.” Japan’s currency appreciated to a post-World War II high against the dollar on March 17.
Japan will be the worst performing market in the Asia Pacific region this year, according to 19 percent of participants in the Credit Suisse poll, while 26 percent picked India amid inflation concerns.
The Bombay Stock Exchange Sensitive Index, or Sensex, has lost 8.3 percent this year, the most among major Asian gauges, data compiled by Bloomberg show.
